AAPL, GOOG: Bernstein, BGC Debate Relative Prospects on CNBC

By Tiernan Ray

Bernstein Research technology analyst Toni Sacconaghi, who follows Apple (AAPL), and has an Outperform rating and a $725 price target on the stock, was on CNBC a short while ago being quizzed about technology stocks’ relative underperformance as the broader market hits new highs. He was followed almost immediately by Collin Gillis of BGC Financial, who has a Hold rating on Apple stock and a Hold rating on Google (GOOG) as well.

Sacconaghi was asked first about the broad view on tech:

Look, I think a rising tide lifts all boats. Technology, ex-ing out Apple, has performed largely in line with the market. We think tech is inexpensive relative to the market, in fact it’s at a 30-year low, and we do think the sector is attractive.

The rest of the segment then proceeded to a discussion of Apple. When Sacconaghi was asked if he thinks the stock could go lower, he said yes:

In the short term, Apple is at an interesting inflation point. Investors are clamoring for Apple to return more cash. They have created an expectation they could return materially more cash. If they do, the stock could move up by $40 or $50. If there’s no incremental cash return before the earnings report in April, or if it’s only modestly higher, I think you see the stock trading lower. The numbers for the June quarter are too high, and so the specter of guidance that might come in lower could push the stock below $400. The stock’s very inexpensively valued and an exceptional value for long-term investors. But it is still owned mostly by growth investors, and they need to see new product, and incremental upside for revenue. Those might include new carriers, or a converged device that blends a tablet and a notebook might be one such possibility. That would create a lot of excitement because it would renew prospects for growth. Right now, their principal products, at the high end of the smartphone market, are facing maturing product cycles.

Well, I think Apple announcements often carry more than the average weight. You have to remember that 60% to 70% of profit for Apple comes from one product, the iPhone. And so clearly a major announcement, such as new carriers for the iPhone, or a lower-priced iPhone, could meaningfully turn the tide for Apple.

For his part, Gillis warned that there may be a time to buy Google below $800 in coming months:

In the March quarter for three years in a row, there has been a 10% sell-off following the earnings report. Google tends to be seasonally stronger in the latter half of the year, thanks to back-to-school, back-to-shopping, when advertisers are willing to pay more.

Gillis was asked about rumors that Google is trying to make an end run around Amazon.com (AZMN) and introduce a service to bring goods from retailers direct to your door, and whether that would be a “huge change” for Google’s business:

Absolutely [It's a huge change]. Google has their fingers in a lot of pies. Their core business is slowing down. Look at Google.com revenue, it was below 20% growth, year on year, in the last 2 quarters. But investors get excited seeing them chasing after new revenue opportunities. And Amazon is now becoming a trusted starting point, which means that people don’t need to use Google as much, and Google is losing those high-value clicks.

As for Apple, Gillis was asked if the stock is starting to put in a bottom, Gillis said “It’s certainly starting to feel like that.”

“It’s been a bit of a falling knife, though. Every time you want to catch it, it drops down another 10 points.”

Gillis asserted that “There is bound to be some news out of this company,” and when he was asked by CNBC’s Melissa Lee why the company is bound to introduce something, Gillis responded, “Because it’s what they do for a living.”

“They have $137 billion in cash, and unless they’re going to burn it, they’ve got to give it back to investors. Now, it is reasonable you will see some news flow out of this company in the spring time frame.”

Gillis was also asked if the company’s dividend should “have a 4 handle”:

It’s a great question. When the dividend was first announced last year, the move to the upside surprised me. Normally, a dividend increase doesn’t give you that boost. If they raised the dividend by 50%, and got about a 3.7% yield, that would be seen as in line with high quality corporate bonds, that would give you a good lift.

Apple shares today are rising with a robust market, up $9.22, or 2%, at $429.27. Google shares are up $12.50, or 1.5%, at $834.

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There are 13 comments

MARCH 5, 2013 11:39 A.M.

Ron wrote:

Fire Cook. That's your answer

MARCH 5, 2013 11:47 A.M.

Anonymous wrote:

Melissa Lee. Wow. That doll is such a genius. I can't take it. What was she thinking. Apple will make the iPhone 5 forever until the $150 B in cash is all gone. What a presumptuous concept. She should've been an archeologist.

MARCH 5, 2013 12:36 P.M.

xalida wrote:

If leaks on iPhone 5s are reasonably accurate, it's another minor marginal upgrade with perhaps a better camera, faster cpu, in colors, and a dated fingerprint feature which has been available for ages. What a big woopty-do! It takes Apple a year to make such insignificant changes?

If the July release is true, Samsung s4 will have 4 long months to clean the clock of current iPhones and the 5s when available. Will someone please wake Cook the dum-dum and his boys up.

MARCH 5, 2013 12:50 P.M.

@salida wrote:

"Will someone please wake Cook the dum-dum and his boys up."

Dig their heads out of the sand or pull them out of their arses.

MARCH 5, 2013 1:13 P.M.

Tom wrote:

Cook has his head up his as-

MARCH 5, 2013 1:55 P.M.

Chen wrote:

Samsung is kicking the kiving daylights out of Apple in every way, shape, and form. Down goes Frazier! Samsung owns Apple!

MARCH 5, 2013 2:08 P.M.

Peter wrote:

Tim Cook to appear on Nightline this wseek advising everyone " Not to bet against Apple" LMFAO

MARCH 5, 2013 3:50 P.M.

ahem wrote:

Why is everyone blaming Cook for AAPL stock dropping? He runs a company, he has no control over stock prices. You geniuses should be questioning why are stocks like goog, amzn, lnkd, nflx rising and rising on nothing. It's just the flow of investor money from falling stocks to rising stocks.

MARCH 5, 2013 6:29 P.M.

Ahem wrote:

Apple is a dead company run by dead people.
Money is flowing to all the other techs
because they have real Leaders with real
vision and a set of balls. Apple has Cook
running in circles, no leadership and is
a Big Pussy.

MARCH 5, 2013 9:23 P.M.

Jake_in_Seoul wrote:

Thanks, guys and gals, for my daily dose of clueless Tim Cook bashing. Unfortunately for your team, you run into a central contradiction: if Cook really were as poor a CEO as you cheerfully indicate, instead of derisory calls for his firing, there would be . . . silence (think Steve Balmer).
In short, your very stridency reveals the existence of a hidden agenda and fatally undermines what slight credibility you might otherwise possess.

Sacconaghi is obviously smoking something, the iphone sales are decreasing simply because the iphone is boring and outdated. Google has taken the lead in Android innovation and the hardware producers are releasing smartphones way more powerful than the iphone 5. It’s clear that people now realize they’ve been paying top dollar for nothing special all to put huge dollars in Apple’s greedy pocket. The younger generation is turning to Android and they are going to fuel the smartphone/Android market whereas the iphone market will drop. The iPad/Android tabs will be replaced by more useful tablets powered by Windows 8. Windows users will opt for powerful Windows tablet/computers for almost the same price as an iPad. Why would any buy an iPad that has limited capabilities when they can use a Windows 8 tablet/computer that can do all the functions of a real desktop/laptop computer when the ease of a touchscreen and attachable keyboard. The new Samsung 500T 11” tablet running Windows 8 for $699 including a detachable keyboard similar to the Mac keyboard and include 64KB ram with a SD slot for an additional 64 GB? Technology has surpassed Apple now to a new level so unless Apple comes up with a better plan, I’m going to keep shorting it! Thanks Apple for huge decrease in share value since the failed iPhone 5 and AppleMaps was announced!!

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.